Royal LePage - Your Community Realty, Independently Owned and Operated, (905) 731-2000
Jim Reid, Broker, (905) 731-2000
COMMISSIONS/ FEES
The commissions and fees charged for real estate transactions can vary considerably from one transaction to another. In fact, rates vary due to numerous factors that may influence a real estate transaction, such as: property supply and demand, level of services, legal risks, marketing expenditures, levels of expertise, types of competition, economic conditions, market trends, etc., etc.
COMMERCIAL
Often the type of real estate deal strongly influences the commission rates charged. Commercial sales of businesses or properties can range from 6-10% commission rates. For example, complex deals may require the realtor to prepare financial projections, income streams, business strategies etc. Several partners may each have their own realtor.
COTTAGES/ VACATION PROPERTIES
Cottages or vacation properties may need a local realtor plus an associate in the city to sell and purchase the property. Thus, these properties may need commission rates of 6-8%.
a) RESIDENTIAL (Standard Rates)
The vast majority of residential real estate in the GTA is carried out at 6% or 5% commission rates. The real estate brokerage company collects the listing commission from the Vendor.
This allows the Listing Broker to pay the Purchaser's broker half of this commission, (3% -2.5%).
CAUTION: Recently, some listing brokers have been charging the Purchasers' broker "marketing fees" of up to $300.00 to help offset some of their advertising costs,(and increase their profits!). Jim Reid does not charge "marketing fees" as such fees can discourage the purchaser's agent from taking his client to see your property.
The sales representatives get paid from 50% to 100% of these 3% to 2.5% commissions.
Some Brokers charge the sales representatives monthly fees for offices, administrative and generic advertising expenses. Others take a fee for these services out of the commission rate.
Vendors who pay these standard rates usually obtain 100% access to all the possible services of a professional realtor. Such services may include: extensive multi-media property advertising and promotional activities and materials, prospecting for buyers, specific market research, networking, negotiations, service providers, (lawyers, home inspectors, mortgage brokers, tradespeople), municipal research, legal contract preparations and comprehensive paper trail, liability insurance coverage, regulated trust accounts, full administrative services, appointment booking and management services, dispute resolution processes, etc. etc.
There are numerous benefits to both real estate sellers and buyers from using these full service brokers.
For example:
Jim Reid's average sale varies from 98-99% of the original listing price. The average for all agents is only 95-95.5%. This extra 3% or more represents more than $10,000 extra revenue for most of his clients.
Due to Jim's extraordinary marketing expertise, Jim Reid's listings are sold on average within 28 days. The average agent takes 6 weeks to sell their listings. Also, more than 30% of their listings are not sold during the listing period.
b) RESIDENTIAL (Discount Rates)
Some real estate brokers offer limited services below 5%.
Many of these "discount" brokers are not members of the Toronto Real Estate Board and thus aren't required to follow strict ethical guidelines, maintain sufficient insurance nor follow professional administrative and legal guidelines.
Discount brokers may use many "gimmiks" to attract listings. Some may advertise only "2.5%" commission rates, but don't pay anything if another broker has a buyer. Some may add on "fees" for low quality services.
Others may offer very low commissions to the purchaser's brokers. Thus, brokers may avoid showing the discount agent's listings.
Discounters have low income streams, so they must keep their costs very low. Thus, they can't afford the full services needed to attract more buyers in order to get top market prices for their listings. Some require very low list prices so that they can sell quickly and not incur any expenses.
Discounters often employ "high pressure" tactics which are based upon exaggerated financial benefits and greed. In reality, some Vendors might save 2% on their commission, ($6,000), but sell their home for $10,000 less than they could have with another real estate broker!
"Discounters" are precisely what they advertise. They offer less service and protection than normal. By spending less, do you expect to get more? Of course not! If you spend less you always get less!... a lot less!
It is important to understand that with a full service broker, you will get at least as good a financial result as a discounter. But, with a full service broker, you have a much greater opportunity to exceed your expectations!
(In 2004, Jim Reid took a listing at his standard 5% commission rate. He listed the property $40,000,(7%), above what his client first suggested. He sold it in two weeks $3,000 above list price! His client was so pleased, they awarded him a 6% commission!)